Online marketing not hit and hope

By DITA DE BONI

Nasdaq fortunes may dip and spike, but there seems to be no shortage of online gurus offering e-marketing advice.

And Tuesday's lunch function held by the Auckland branch of Sales and Marketing Executives International (SMEI) - which organisers say drew a record crowd of around 150 - proves there is no shortage of Kiwi practitioners hungry for advice on how to perfect their online marketing efforts.

Frank van der Velden, chief executive and part owner of Brave New World, one of New Zealand's newest online marketing solutions companies, addresses the crowd with what one might describe as the 101 of electronic marketing.

Imploring his audience to remember that "love and care must be impregnated into every behaviour," Mr van der Velden says direct advertising spending, of which e-mails, interactive banner ads and other personalised electronic mediums such as WAP phones make up an ever-increasing portion, is growing in some countries at almost seven times the rate of traditional "above-line" advertising.

"I love the quote from our strategist Terry Levenberg that 'in our new world, we concentrate on what customers value, not what we sell'," he says. "Communication is ... about gathering data on your customers in one place in an orderly fashion so you can deliver communications down whatever channels your customer choose at the time they choose it and in the form they choose."

A year ago, it would not have been considered brave to predict that, in the near future, a clear majority of advertising here would be funnelled through the internet. On Tuesday, it seemed a very brave prediction indeed, especially as it was made on the day news from the US told of a slowing in online advertising translating into a painful comedown for internet glamour stock Yahoo!

In fact, Mr van der Velden used Yahoo! alongside several other examples of website success stories, citing it as a company that has perfected the art of the "website experience - stripped of big images and other stuff, so people can get in quickly and get out quickly."

He says practitioners have until 2002 to brush up on what works and what doesn't.

"Procter & Gamble announces an increase in online spending at the expense of offline. Why? Procter & Gamble spends only 30 per cent of launch budget for haircare product "Physique" offline while 70 per cent goes online. Why?

"Australian businesses spend nearly double on below-the-line customer advertising/communications compared to above the line and it grew 15.6 per cent last year!" he cajoles. "Why?!"

Why indeed, when Santa Clara-based Yahoo!'s market value has plunged $NZ25.4 billion, or 15 per cent, since August 30. To lure business, Yahoo! and other popular online sites have been lowering their advertising rates. The average online ad rate fell from $US33 per thousand unique visitors at the end of 1999 to $US31 during the summer, according to a division of Media Metriz, which tracks online web traffic.

Total revenue generated from the sale of online banner ads has fallen from a peak of $US590 million in March to $US540 million in July, it adds.

In New Zealand, a quick tally of rates charged by the top websites shows rates rarely fall below $100 per thousand impressions (our standard industry measure, called cost per thousand impressions, or CPM) for targeted campaigns. A mini boom in e-advertising solutions companies such as Engage, Blue Chilli and Brave New World attests to a growing market for agencies that specialise in online advertising solutions, but rates remain disproportionately high, according to many in the industry.

Mr van der Velden agrees that internet advertising is a necessarily expensive pursuit. "Who knows what it will cost? ... [But] you can be assured that the best places for consumers will be expensive, that is the model of publishing."

And while companies such as Yahoo! and stablemates Inktomi, DoubleClick and About.com suffer stock exchange dips periodically, the aggregate spending on online advertising is still growing.

Internet analyst Henry Blodget of Merrill Lynch predicted in a report last week that total online adspend would reach $US7 billion this year, up 75 per cent from 1999. By 2005, it is thought online advertising will account for as much as 12 per cent of all US marketing expenditure, up from less than 2 per cent this year.

There is no reason to believe New Zealand's online adspend will not grow markedly to match internet penetration and usage, albeit off a much smaller base.

There is no consensus on exactly what impression electronic advertising and marketing has.

While few would argue that websites and direct e-mails are not valuable components to an electronic advertising campaign, banner ad click-through rates tend to be low, around 0.5 per cent, and many industry figures question their effectiveness.

As Mr van der Velden and others see it, online marketers must be able to identify their target web audience and be judicious with their online adspend dollars.

"In New Zealand, there are only 10 to 12 general consumer websites worth considering. Beyond that you get into niche sites that can demand a premium, so don't get hung up on cost per impression."

The increasing sophistication of measurement techniques for online advertising are also a very real benefit. Although these services come at considerable cost, they have become an integral part of the online advertising experience and are as tailored to the advertiser as the advertiser can be to a prospective consumer.

The new online marketing manager for Brave New World, Dave Hiatt, says: "Online marketing is about implemented targeting, measurable campaigns, which are delivered in real time and are accountable. A key benefit is the ability, based on up-to-date reports, to adapt creative pieces throughout the campaign to maximise results."